Appraisal Came in Low Reconsideration Of Value

 

When a residential appraisal comes in low, a borrower prays they have an experienced seasoned loan officer who can write the long form novel needed to argue for a better valuation. 

The Consumer Financial Protection Board is "surveying" "checking" and "looking at" the system where residential appraisals come in low and mortgage loan officers or borrowers rebut the valuation

On October 6, the CFPB released a blog reporting that lenders that fail to have a clear and consistent method to ensure that borrowers can seek a reconsideration of value risk violating federal law. The blog focuses on the “reconsideration of value” (“ROV”) or appraisal rebuttal process.

In the purchase process borrowers pay for the appraisal for a lender to back up the loan to value and review the condition of the subject. The USPAP appraiser acts as the eyes for the bank. After the 2008 crash rules were set in stone that mortgage loan officers, lenders, brokers -anyone who makes a commission on a home loan cannot speak to licensed appraisers. In that long time ago past mortgage bankers would email comparables and have the listing agent review the errors. Today lenders work through an intermediary called a AMC or RAC and lenders never speak to appraisers. To rebut a low appraisal is a process that every lender has invented their own wheels. The reconsideration of value process is  a hit or miss. Homebuyers and homeowners can ask for a lender to reconsider a home valuation the consumer believes to be inaccurate. 

The reconsideration allows for borrowers to point out specific issues such as factual or other errors or omissions, inadequate comparable properties, or evidence that the appraisal was influenced by prohibited bias. The problem is that borrowers have no access to appraisal data, they don't really understand the ten page report, and don't have the experience to argue with facts. Only facts can overturn an appraisal. CFPB's blog warns that lenders must make sure that their reconsideration of value process is nondiscriminatory and clearly available and accessible to all.  

CFPB issued an outline on options to prevent algorithmic bias in home valuations. Bias exists even in the data of closed loans provided by the FHFA.  Additionally, along with other regulators, the CFPB is looking at the work of the Appraisal Foundation and the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE).

 Couple bullet points in going forward I must note:

• Of course the originator wants the appraisal to match the sales price. The deal may fail and they don't get paid. 👎
• Newer Loan officers don't have the arrows in their quiver to write a rebuttal and provide actual comps with correct adjustment and timely valuation points.
• Appraisers like to hold on to their opinion of value.

I have below a list of items to prepare in completing a reconsideration of value.

The ways to overturn an appraisal are: 

1. be kind, have new photos, have documentation, run everything through the AMC

2. a rebuttal needs three comparables that were missed for some reason- say they had not closed on the day appraiser saw  property

3. comparables are within five percent of subject square footage and lot size to avoid large adjustments

4. comparables are within the past three months and are closed sales with a loan, not cash

5. comparables are similar room count and subject property type

6. comparables are in the same track or similar track nearby

7. look at the photographs and compare to old MLS, look at the sky and the weather to verify appraiser actually took the images in the recent time frame

8. How large is the adjustment percentage to the sold price? If huge then maybe the comp is flawed

9. Borrowers think that a new roof, new heater or new paint add value, they do not

10. rehab or remodel that brings the standard of the house up to parallel with  newer house or contemporary kitchen can be adjustments

11. A property can be over built or oddly over improved and not have market value

12. Same thing a property in a luxury neighborhood with simple bones may have more value

13. Future improvements have no value

14 Pools aren't a huge adjustment unless you are in the desert then they are the norm

15.Get your Realtor partners to help. They might not be experts but more eyes on the written appraisal can be helpful. Enlist senior NMLS officers in your office to help

16. Everything must be written and organized. You need photos to show rather than tell. 

17. Residential appraisals do not use square foot price

18. Use the form the AMC provides and add pages

Generally it is FREE to submit a rebuttal. (This ought to be a law.)

Ordering a second appraisal does not mean your outcome will improve and does not blind everyone from seeing the first appraisal.

USPAP appraisers are our eyes and unseen partners. A long time ago in a place far away we were all friends.

Caroline Gerardo, 

C G Barbeau

American Financial Network Inc
Mortgage Banker  

NMLS# 324982

There is a huge push after the Black Lives Matter movement to find ways to end discrimination in home lending. Appraisal is one of these pin points of pain.